Do People Respond to the Mortgage Interest Deduction? Quasi-experimental Evidence from Denmark

Jonathan Gruber, Amalie Jensen and Henrik Kleven

American Economic Journal: Economic Policy, 2021, vol. 13, issue 2, 273-303

Abstract: Using a major reform that scaled back the mortgage interest deduction for middle- and high-income households in Denmark, we study how tax subsidies affect housing decisions. We present four main findings. First, the mortgage deduction has a precisely estimated zero effect on homeownership for high- and middle-income households. Second, the mortgage deduction has a clear effect on housing demand at the intensive margin, inducing homeowners to buy larger and more expensive houses. Third, the deduction has sizeable effects on household financial decisions, inducing them to increase indebtedness. Finally, the reduction of the tax subsidy lowered equilibrium house prices.

JEL-codes: G21 G51 H24 K34 R21 R31 (search for similar items in EconPapers)
Date: 2021
References: Add references at CitEc
Citations: View citations in EconPapers (19)

Downloads: (external link)
https://www.aeaweb.org/doi/10.1257/pol.20170366 (application/pdf)
https://doi.org/10.3886/E119157V1 (text/html)
https://www.aeaweb.org/doi/10.1257/pol.20170366.appx (application/pdf)
https://www.aeaweb.org/doi/10.1257/pol.20170366.ds (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:aejpol:v:13:y:2021:i:2:p:273-303

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

DOI: 10.1257/pol.20170366

Access Statistics for this article

American Economic Journal: Economic Policy is currently edited by Matthew Shapiro

More articles in American Economic Journal: Economic Policy from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().